032: How Determination Builds Unstoppable Startups

Ever wondered why some tech startups get snapped up by giants, while others race ahead to dominate the market? Join us as our insightful guest takes us through their whirlwind journey of launching, scaling, and eventually selling a tech company that started with just $7 million in the bank and a team of 25. This episode offers a first-hand look at the strategic choices and risks involved in navigating a cutthroat industry where acquisition often trumps innovation. You'll discover why recognizing the grit and determination in people can be a game-changer, even more so than credentials, and how these elements played into building a resilient startup during the challenges of the COVID-19 pandemic.

Our conversation also touches on the delicate balance of growth and stability, particularly in the face of economic turbulence. Learn from our guest's experience of riding the highs of an investment bubble and the hard-hitting lessons from multiple downsizings that followed. As markets shifted, so too did their approach—pivoting towards sustainable business models and prudent capital management. This episode is packed with crucial lessons for any entrepreneur faced with the complexities of growth, hiring, and strategic decision-making in uncertain times. Whether you're a seasoned business owner or just starting out, these insights could prove invaluable in your own professional journey.

Colin Knox on LinkedIn:
https://ca.linkedin.com/in/realityknox

Gradient MSP:
https://www.meetgradient.com

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📒 The Books Referenced in this Episode: 📒
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$100M Offers: How To Make Offers So Good People Feel Stupid Saying No (Acquisition.com $100M Series) Paperback - by Alex Hormozi (Author)
https://amzn.to/45Vod1d

Chapters

• 0:08 Building a Tech Company Success Story
• 9:55 Opportunities and Overcoming Hiring Challenges
• 15:20 Lessons in Business Growth and Stability

Transcript

Speaker 2: 0:08

I said, okay, so no agreement here. We raised, we got $7 million in the bank. We know that we will have that. We didn't close the term sheet but we had that sitting there. You know we'll have $7 million in the bank. We know that we can run this fast. But it came down to a thing of every major platform in the space was trying to acquire us, and these are major, major companies with serious resources behind them. We were a 25-person company and I want to say we had six, maybe nine people in dev slash QA.

Speaker 1: 0:43

Nine of those were in dev. What were you turning for revenue at that time?

Speaker 2: 0:47

I can't disclose that unfortunately.

Speaker 2: 0:49

That stuff's all protected, no worries, and long survives in those agreements. So, right, we were doing very well that way, right. But you know, I sat there and I was like does 7 million give us enough runway and even enough speed to outrun the likelihood that, if these guys want to be in this category, so bad, they are either going to buy somebody else, whether it's the right company or not, or they're going to build something. You know, I'd say at that point in time I was ignorant to large companies' abilities to build brand new software and brand new products and I think that's a whole major lesson learned and something that could be delved into. But in most cases, large companies, it is much easier and much better for them to buy something that is proven and working and quality than starting from scratch to build something. It's a whole risk mitigation and it's a whole different type of you know, group of people to architect a new solution, build a new solution, qa a new solution, beta, test it, work through all the bugs, the gripes, everything else, right.

Speaker 2: 2:03

Um, so we, we were ignorant to that at the time, but we figured max, we've got 18 months before each one of these players goes and erodes our entire opportunity and you know so we can either raise seven million and race against time and hopefully we've built a big enough business that somebody either comes back with a much bigger check, or you know that we've defended our position and created, you know, what you would call a defensible moat, um, around around yourself as a business and um, I'd say ignorantly at the time, we didn't believe we had that opportunity. Right, these again major businesses. And so we said, you know what? Right, these again major businesses. And so we said, you know what? This is a great valuation, it's a great price. Um, I mean, we have early investors that literally thousand x to their investment on that, on that sale. Um, everybody in in the last round or in the middle round was 100x, and then I think the worst that somebody did was 10x. So, yeah, I mean it was an amazing event for every investor.

Speaker 2: 3:11

I felt good about it. It was a, you know, a windfall for myself personally and you know, on that it was hey, there's an opportunity now to step into an enterprise-sized software and technology company and learn a lot more. And so I don't regret any of that decision. I mean hindsight now, we would have way outrun everybody, we would have outperformed everything. And I look now a lot of those companies still aren't in this category the same way and it's being run by other people who are now chasing it and doing very well and I'm super happy for them and they're all friends and I think that you know it's. It's amazing stuff to see. We would have handily won that, that category. I have no doubt now, but, um, but yeah, I mean it was a million great lessons learned, new experiences, everything else, and set us up for the opportunities that we're on now.

Speaker 1: 4:05

That's an amazing success story. Obviously, especially, I'm amazed at the short period of time that all happened, right, cause really, in the grand scheme of life, like four and a half years is really to take it back. I'm going, we're working on our 15th year of business, right? They go on, oh my goodness, four and a half years. You did this, all this stuff Right, and then turn on and all the challenges you would have had to face at growing at 200% right, as we were talking about 200% revenue year over year, like, oh my goodness. I mean, I just can't imagine the speed of everything that was happening around you.

Speaker 2: 4:38

Yeah, and I mean we had a team of eight players, but what's interesting is I always called them the renegades. We did hit a point in time, but I'd say of the 25 people we had, I would say 16 or 17 of them, we were their first job, like first actual full-time job that they had ever had. They some of them had done some freelance stuff here and there, but nothing, nothing consistent, nothing crazy. They were just people that believed and they were gritty and they were hardworking. We gave them the room to perform and to do and to create and do things. Was it perfect? Not a freaking chance when I say we were building tech that nobody had built. We bricked a lot of servers, like we had agents out there on all these active directory servers, which are probably few and far between now, but we had to run it out there and do stuff and we had, we had misconfigurations that would lock people out of their client networks. At times we had, you know, push a new version of an agent and it would blue screen the server, like it was treacherous, treacherous things that happened there. But no, I mean it was very interesting what we were able to build with, you know, on paper, the people that were as part of that business.

Speaker 2: 6:04

Right, I'd never done a software company really. Right, I'd never built a dev team, I'd never created net, new intellectual property and all of that type of stuff and navigated headwinds of you know, cloud, saas business and global. I mean we were in 30 something countries we had customers in. Yeah, it was like nothing at that scale we had. I want to say, last I had checked, you know, when we owned it, there was 160,000 businesses in that solution. Right, like nothing at that scale before. So I mean, it was amazing for what we built, but it it it just was a testament to, you know, a players and giving people a chance and finding the right people and and just perseverance and pushing through on that stuff. But yeah, it was was a remarkable journey yeah, it was, was a remarkable journey.

Speaker 1: 6:59

Yeah, I'm impressed. It sounds remarkable and, like I said, just trying to imagine you're talking about the people that really said this is kind of like their first full-time position working for your organization. And you say A players. I'm thinking about what history we're using to identify them as an A player, when you brought them in brought them in.

Speaker 2: 7:24

I was cheap, seriously right, everybody, even where we live, right? So I'm in Western Canada and in Alberta and a very predominant oil and gas economic environment here, right, it's. You know, calgary is called Cowtown, it's farmers and oil and gas, right, like that's what it is. So I mean, to find somebody that builds software and wants to join a software company that's not in that industry was difficult, and so you had to go to young, you know, fairly new grad, dynamic people that just had that twinkle in their eye of, and almost that confidence of, I can build anything you ask me to build, but also enough, I wouldn't call it immaturity, but I guess greenness to them that their salary expectations weren't outlandish, right, and so, yeah, I mean, that's really what it came down to was being gritty and cheap and cheerful and finding people that came in and just loved what they did.

Speaker 1: 8:25

So you're painting this picture? You mentioned Calgary and I have actually just booked my flights yesterday or yeah, yesterday for a trip to Banff to do some backpacking in.

Speaker 2: 8:35

September, nice, amazing.

Speaker 1: 8:37

So you're painting this picture where you're talking about this cow town, um of what I'm. What's the experience when I get there?

Speaker 2: 8:43

Uh, in September I mean won't be. I mean we've, we've moved along in general, but if you came in July, next month, I mean we've got our Calgary stampede, which is all just it's rodeo and you know, carnival and and everything all just intertwined and it's 10 days of insanity every year. Insanity. But yeah, I mean there's still a lot of farming. When you drive out from Calgary you'll see tons of farmland, heading out to the mountains and the indigenous lands and stuff along the way there and stuff. But yeah, you still see some people walking around with their cowboy hats, or maybe not in the hats but walking around in boots. But there's still modern, modern people too and young people that dress hip and and wear normal clothes.

Speaker 1: 9:30

So I know I'm excited to uh check out the beauty of banff once again, and that's my escape and one way of uh usually try to do it annually and get together with some former MSP-ers, in a sense, and some that are still in the business today, and get together and go, yeah, down a 40-pound pack and go out and live the free life for a week.

Speaker 2: 9:52

Yeah, absolutely, it's awesome.

Speaker 1: 9:55

And the fact you took chances on. I guess you took chance on people. Right, you give people opportunity. You said those who were being cheap, but you also gave these individuals opportunities that they might not have had otherwise.

Speaker 2: 10:08

Yeah, I think everybody deserves an opportunity to do stuff right. I think lots of people took chances on me. I mean, when I moved to being the head of service delivery for the MSP I was at, so it was well. Again, it wasn't really an MSP but the IT company. They were almost a $5 million shop. You know 30, some employees, I think I was 26, 25 years old, so I was probably younger than, and significantly younger than, 90% of my my team.

Speaker 2: 10:40

Like that's a bold move for a business to take, uh at that time. So they took a chance on me and when I started you know the partnership msp and then even my own a lot of people gave me a chance and gave me a shot and gave me the benefit of the doubt and and even one of our clients that when it was my MSP that I had taken on one of those two, they came to a point where they acquired a massive, they did a reverse takeover of a massive organization and I was sure that was the end of the road for me. And that company had a full IT department and their CFO came in and said you tell us what you need and what help you need. Do we need to keep this IT department, or can you guys take on everything? And they gave us the chance and we said we'll take on everything. They let go of that IT department, everybody else. They gave us the full shot, and we were probably six, seven people at the time. So, yeah, I've always been a believer in that. Everybody deserves an opportunity, doesn't matter what their background is, where they came from, what challenges they have, what it looks like they can't do, if they have the right traits of you know, grit and determination, and you can just, you can just see it in people's eyes.

Speaker 2: 11:58

I like I still feel that is you can meet somebody and be like that person could do anything, whether they believe it or not, or whether they've done anything or not, you can just tell. And so those are the people that I'd rather be with. I don't want to be working with somebody when some time is tough and they're like all right, well, this isn't as cushy as I hoped. I'm going to see you later, right? Or hey, we're in a crisis period and they're like yeah, but my wife just cooked dinner and I'm going to go sit down and eat it, right? Yeah, by all means, I want people to have that as their regular every day, but when it's crisis mode, I want the people that are like, whether I own this or not, I'm I'm at war for this company, um, and, and those are the people that I'd rather have on my team no, I, I can appreciate that and I've through that process.

Speaker 1: 12:52

Um, you said you can kind of see in their eye and they have that grit. Um, oh, that or the first. Talking about the two or first two companies, did you make any bad hires? When you look back at them, you're going to oh, my goodness, what the hell was I thinking?

Speaker 2: 13:07

Oh, tons, tons of bad hires. Right, I think in some cases it was getting away from looking for the grit and hiring and getting out over our skis on stuff. Right, hiring before a business was ready for a certain role, or even not even necessarily the business was ready for that role. But just again, you know, hiring somebody from their accolades of previous accomplishments, or or you know things that had allegedly been accomplished or whatever, both in this business and in the last one you know, and realizing that, oh, that's a person that just comes in to manage and isn't willing to get their hands dirty and isn't willing to actually run it Like they. They could manage a team just fine, but hopefully this thing is all just rolling Right, um, and so, yeah, I mean it's, it's come down to that.

Speaker 2: 13:58

I think, at any point, in any business I have now or in the future and it doesn't matter how big it is I will always, always go for grit now and and willingness to, to dive in and do anything. I will always choose the person that will never say that's not my job versus the one that has built a billion dollar, whatever. I don't care if you've built all that stuff or haven't. If you start telling me what your job is and what your job isn't. There's no path for you with me, and that's just for me, the way that it needs to be.

Speaker 1: 14:35

Now with, obviously we know we're post pandemic and we had a couple of years there where things were kind of dicey in regards to when it came to people. Um, what kind of challenges did you face during that time? Um, I mean, we know about our peers have faced and how did you overcome those when it comes to people?

Speaker 2: 14:51

and hiring for grit yeah, I think, um, so we, we had scaled up. I mean this, this business was this current one, was it's? It's a covid baby? Okay, it was. It was started during during covid in in late 2020 and you know, I think we we did a lot of the right things and we were forced and wanted to be fully remote, fully distributed and stuff like that.

Speaker 2: 15:20

We saw some really great early success. We, with that success, coupled with you know, past past exits and success, became very attractive during an investment bubble and venture capital bubble. So we raised you know past exits and success became very attractive during an investment bubble and venture capital bubble. So we raised, you know a significant amount of money and we scaled up big and we hired a ton of people and you know, some of those were the absolute right people and some of them were the absolute wrong people.

Speaker 2: 15:50

But when all the economic headwinds came in after the recession, when there was this or after the pandemic story and there was this massive looming recession, everything changed economically globally in the investment world and venture capital world and as much of a darling as we were based on how many free customers we were getting and the technology we were building and the opportunity and the pace that we were running at it wasn't the same investable business. So we had to pivot hard as a company and protect the company so that we had the runway and survivability and sustainability. And so, you know, we we had to let go a lot of the people, some of the ones that made a lot of sense to let go and probably never should have been hired anyways, and a lot of that I, to this day, wish that they were still on this team and and able to contribute the way that only they can contribute. But there's a number of other businesses now that have the the fortune of having those people driving their companies and stuff too. But, yeah, we I mean no secret we have the company in November of 2022 and we halved the company again in a year ago, july last year. Just Just, you know sheer, sheer necessity. I mean, it was the right thing to do, it's what we absolutely had to do. But you know it's. It's one of those things now where you know we leaned out the business, we stabilized the business, we're we're in a good position now and moving forward and and growth is is coming along very nicely and growth is is coming along very nicely.

Speaker 2: 17:35

But, yeah, you, you definitely learn a lot around um, growing a business or or making decisions in the business based on the merit of what the business is and the and and what the current situation is. Right, um, and not ever being um I wouldn't say we were irresponsible but less diligent with capital. Right, I think you decide to make hires earlier than planned because the right person maybe appeared, and stuff like that, you know, opportunistically. I think there's still considerations for that. But in most cases, unless I can justify that role at this point in time, I will not make that higher again type of thing, right? So, yeah, I think, a lot more appreciation for recognizing where business is and what a business needs at any point in time and focusing on that and just running, always running a good, viable business by a definition of what a good, strong business is, not by what a business could be.

Speaker 1: 18:33

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